Wednesday, July 29, 2009

New Home Sales Followup

Following up my previous post on housing . . .

The WSJ came out with an article the next day with a fuller explanation of the good and bad news regarding Monday's new home sales 'rise'.

Compared to the blogosphere the WSJ was 24 hours too late. I bring this up because 24 hours to the markets is a looong time. Calculated Risk immediately presented the complete picture, good and bad news alike and continues to be an excellent source for the housing market.

While some blogs are complete drivel others are faster and superior to the popular media. Those superior blogs are one reason for the slow decline in the print and television media.

Monday, July 27, 2009

New Home Sales - Statistics Never Lie!

I don't forsee myself commenting too much on events well covered by other bloggers but the recent new home sales reporting deserved some piling on.

New home sales were up 11% or down 21.3% Excuse me? Is that really good news or really bad news?

Yahoo News had this to say:

New home sales in June posted the fastest increase in more than eight years as buyers took advantage of bargain prices, low interest rates and a federal tax credit for first-time homeowners

What was omitted by Yahoo: The home sales increase was on a month to month basis, and NOT on a year over year basis as it should be presented. Month to month (May 2009 versus June 2009) sales were up 11%. Year over year (June 2008 versus June 2009) sales were down 21.3% Like many other economic events, home sales show a strong seasonal tendency and to only tout monthly changes without showing year over year data does not provide a complete picture to the reader.

Calculated Risk provides an excellent blog entry and graph showing the sales during each month as well as year to year.

Fundmymutualfund has a slightly snarkier commentary:

I'm feeling faint.... the news is so overwhelmingly good. Even though sales surge EVERY year in the spring let me shoot this bunny out of a cannon in celebration because....
Sales have risen for three straight months. Now keep in mind this is with taxpayer handouts of $8000 to first time homebuyers, along with unnatural mortgage rates created at the expense of savers in this country via Uncle Ben's actions. More on this later. So the important question in a SEASONAL number is the year over year % change. Sales of new homes were down 21% versus June 2008.

At least the Wall Street Journal had the sense to put in the year over year numbers, but in the body of the article and not in the title?

The Big Picture is also all over this:
More Nar Nonsense

Commercial vs Residential Real Estate

New Home Sales Fall 21.3%

What is going to happen to all the good news reporting in the fall when it is very likely new home sales will fall on a month to month as well as yearly basis?

Disclosure: Short some housing stocks in personal and aggressive client accounts

Friday, July 24, 2009

Oil in storage -- Someone else is noticing

The WSJ must be reading my blog already :) WSJ:OPEC Braces for Decline in Crude Prices
The Organization of Petroleum Exporting Countries is bracing for a sharp drop in
crude prices in coming weeks, as huge reserves of oil-based fuels continue to
pile up and the space to store them runs out.

Considering the current high correlation between oil and stock prices it will be curious to see if/when oil prices drop how much of an affect it will have on stock prices.

Wednesday, July 22, 2009

Fill er up! Where's all the oil going?

The oil markets are always fun to watch and while the popular media concentrates on how much higher oil can go, I'd like to point out some bearish data.

Oil and oil products in America are on the rise and nearing levels not seen in at least 20 years.

While the I do not have access to the raw data for the OECD, graphs from the International Energy Agency show the same trend.

(If you have access to additional data on inventory levels in America, OECD or emerging markets I'd love to see it.)

I present this information not to buttress a prediction for lower oil prices but to highlight some info that contradicts the current outlook.

Some additional factors for oil:
+ Peak oil - We'll eventually run out of the oil we pump out of the ground. When production will fall off and how much is finally extracted is up to debate. LONG term I am of the opinion prices will be much higher than they are now, the path to those higher prices is unknown in my mind.
+ Geopolitical - The Israeli / Iranian situation could heat up at any time and if the missiles start flying oil prices will rise.
+/- Oil is priced in dollars - Concerns regarding a weakening US Dollar have played a major factor in daily oil price movements.
- Excess supply - OPEC has cut supply and has the capability of pumping more. The timing and extent of their supplies are entirely up to them but for now that excess supply is available.
- Cheating by OPEC members - Cheating does happen by the member countries.
- Floating storage - Oil tankers are being used to store oil and refined products throughout the world. While some of this storage is due to the contango trade earlier in the year, the profitablility of storing then reselling has dropped dramatically.

Additional reading:


Disclosure: Personal account: long RDC, client accounts: short USO call spreads, long RDC
[edit 07/23/09 12:40pm: cleaned up the prose a bit, added position disclosure]